Document 5

Minister for Climate Change and Energy Efficiency
Minister for Industry and Innovation

The Hon Tony Burke MP

B12/584

Minister for Sustainability, Environment, Water, Population and Communities
Parliament House
CANBERRA  ACT  2600

/	/!

Dear  iplstr  /	0 '17

The European Commissioner for Climate Action, Ms Connie Hedegaard, and I announced on Tuesday 28 August 2012 that Australia and Europe will be linking their emissions trading systems.

I am writing to seek your approval to amend the Ozone Protection and Synthetic Greenhouse Gas (Import Levy) Act 1995 and the Ozone Protection and Synthetic Greenhouse Gas (Manufacture Levy) Act 1995 to ensure that the equivalent carbon price applied to synthetic greenhouse gases is more clearly equivalent to the effective carbon price faced by liable entities under the carbon pricing mechanism  given the linking agreement.

I propose that the Govemment introduce the Clean Energy Legislation Amendment Package, including the Ozone Protection and Synthetic Greenhouse Gas (Import Levy) Amendment (Equivalent Carbon Price) Bi112012 and the Ozone Protection and Synthetiy Greenhouse Gas (Manufacture Levy) Amendment (Equivalent Carbon Price) Bil12012 into the Parliament in the week beginning 17 September 2012.

The Department of Climate Change and Energy Efficiency (DCCEE) has worked closely with your department to prepare bills to implement the Govemment's policy, as announced with the release of the draft Clean Energy Legislation Amendment (International
Emissions Trading and Other Measures) Bil12012 and associated bills on28 August 2012.

For your reference, please find attached the relevant clauses of the Clean Energy Legislation Amendment (International Emissions Trading and Other Measures) Bil12012 (Attachment A), and the relevant clauses of the Ozone Protection and Synthetic Greenhouse Gas Acts (Attachments B and C).

Parliament House, Canberra ACT 2600    Tel 02 6277 7920  Fax 02 6273 7330

I
To provide for the introduction of the Clean Energy Legislation Amendment Package into
Parliament in the week beginning 17 September 2012, I would be most grateful for your response before Friday 14 September 2012.

I have sent a copy of tins letter to the Prime Minister for her information. Yours sincerely

/

GREGCOMBET

copy:   The Hon Julia Gillard MP Prime Minister

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Attachment A- Clean Energy Amendment (International Emissions Trading and Other Measures) Bill2012

76  After section 196
Insert:

196A  Per tonne carbon price equivalent

(1) Within 7 business days after the end of each designated 6-month period, the Regulator must publish on its website the per-tonne carbon price equivalent for the designated
6-month period.

Note:	For designated 6-month period, see subsection (18).

Per-tonne carbon price equivalent-basic rule

[[l  _

(2)  The per-tonne carbon price equivalent for a designated 6-month period is to be worked out to 2 decimal places (rounding up if the third decimal place is 5 or more) using the formula:

Total of adjt1;sted  +	T?ta.l of design  tedl  x Averagcarb?n  unit]
reference pnces 	lulllt percentages	auction pnce

where:

average carbon unit auction price means the average carbon unit auction price for the designated 6-month period.

total of adjusted refereuce prices means the total of the adjusted reference prices for the designated 6 month period.

total of designated limit percentages means the total of the designated limit percentages for the classes of eligible international emissions units that are subject to designated. limits for the financial year in which the designated 6-month period ends.

(3)  Subsection (2) has effect subject to subsection (4).

Per-tonne carbon price equivalent-special rule

(4) If:
(a)  no instrument is in force under subsection (6) at the end of a patticular  designated
6-month period; or
(b)  the per-tonne carbon price equivalent worked out under subsection (2) for a particular designated 6-month period is greater than the average carbon unit auction price for the designated 6-month period;
the per-tmme carbon price equivalent for the designated 6-month period is equal to the average carbon unit auction price for the designated 6-month period.

Reference prices

(5) If:
(a)  a pa1ticular class of eligible international emissions units is subject to a designated limit for a particular financial year; and

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(b)  a designated 6-month period ends in the financial year;
then, within 7 days after the end of the designated 6-month period, the Regulator must,
by writing, declare that a specified amount is the reference price for the class of units for the designated 6-month period.

(6)  The Minister may, by legislative instrument, determine the method that is to be used by the Regulator in making a declaration under subsection (5).

(7) In making a determination under subsection (6), the Minister must have regard to:
(a)  prices paid (whether in or outside Australia) for eligible international emissions units included in each of the relevant classes of eligible intemational emissions units; and
(b)  such other matters (if any) as the Minister considers relevant.

(8) In making a declaration under subsection (5), the Regulator must comply with a determination  in force under subsection (6).

(9)  The Regulator must publish a copy of a declaration under subsection (5) on the
Regulator's website.

(10)  A declaration made under subsection (5) is not a legislative instrument.

Adjusted reference price

(11)  For the purposes of this section, if there is a reference price for a class of eligible international emissions units for a designated 6-month period, the adjusted reference price for the class of eligible intemational  emissions units for the designated 6-month period is worked out using the formula:

Reference price x Designated limit percentage
where:

designated limit percentage means the designated limit percentage for the class of eligible international emissions units for the financial year in which the designated
6-month period ends.

reference price means the reference price for the class of eligible international emissions units for the designated 6-month period.

Modifications of formula etc.

(12) If:
(a)  there is a reference price for a class of eligible international emissions units for a designated 6-month period; and
(b)  the reference price is higher than the average carbon unit auction price for the designated 6-month period;
then:
(c)  the adjusted reference price for the class of eligible international emissions units for the designated 6-month period is to be disregarded for the purposes of the total of adjusted reference prices component of the formula in subsection (2); and
(d)  the designated limit percentage for the class of eligible intemational emissions units for the financial year in which the designated 6-month period ends is to be disregarded for the purposes of the total of designated limit percelltages component of the formula in subsection (2).

(13) If:

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(a)  a class of eligible international emissions units (the principal class) is subject to a designated limit for a particular financial year; and
(b)  there is a class of eligible intemational  emissions units (the secondary class) that: (i) 	is included in the principal class; and
(ii) 	is subject to another designated limit for the financial year;
the designated limit percentage for the secondary class of eligible international emissions units for the financial year is to be disregarded for the purposes ofthe total of designated limit percentages component of the formula in subsection (2).

(14)  If:
(a)  a class of eligible international emissions units (the principal class) is subject to a designated limit for a patticular fmancial year; and
(b)  a designated 6-month period ends in the financial year; and
(c)  there is a class of eligible international emissions units (the secondary class) that: (i) 	is included in the principal class; and
(ii) 	is subject to another designated limit for the fmancial year; and   . (d)  the reference price for the secondmy class of units for the designated 6-month
period is greater than or equal to the reference price for the principal class of units
for the designated 6-month period;
the adjusted reference price for the secondary class of units for the designated 6-month period is to be disregarded for the purposes of the total of adjusted reference prices component of the formula in subsection (2).

(15)  For the purposes of this section, if:
(a)  a class of eligible international emissions units (the principal class) is subject to a designated limit for a pmticular fmancial year; and
(b)  a designated 6-month period ends in the financial year; and
(c)  there are one or more classes of eligible international emissions units (the
secondmy classes) each of which:
(i) 	is included in the principal class; and
(ii) 	 is subject to another designated limit for the financial year; and (iii)	has a reference price for the designated 6-month period that is less than the reference pl'ice for the principal class of units for the designated
6-month period;
the adjusted reference price for the principal class of units for the designated 6-month period is taken to be the amount worked out using the following formula (instead of the amount worked out under subsection (11)):

Reference price   x for principal class

Designated	Total of designated limit percentage _   limit percentages
for principal	for secondaty class		classes

where:

designated limit percentage for principal class means the designated limit percentage for the principal class of units for the financial year.

reference price for principal class means the reference price for the principal class of units for the designated 6-month period.

total of designated limit percentages for secondmy classes means the total of the designated limit percentages for the secondary classes of units for the financial year.

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Interpretation

(16)  For the purposes of this section, if:
(a)  a particular class of eligible international emissions units is subject to a designated limit for a particular financial year; and
(b)  a designated limit percentage is applicable to that designated limit; . then:
(c)  the designated limit percentage is taken to be the designated limit percentage for
the class of eligible international emissions units for the fmancial year; and
(d)  the class of eligible international  emissions units is taken to be subject to the designated limit percentage.

(17)  For the purposes of this section, listed units form a single class of eligible international emissions units.

(18) In this section:

adjusted reference price:
(a)  has the meaning given by subsection (11); and
(b)  has a meaning affected by subsection (15).

class of eligible intemational  emissions units means: (a)  the class mentioned in subsection (17); or
(b)  a class specified in regulations made for the purposes of subsection.l23A(1).

designated 6-montlz period means:
(a)  the 6-month period ending at the end ofMay 2015; or
(b)  each later 6-month period ending at the end of May; or
(c)  the 6-month period ending at the end ofNovember 2015; or
(d)  each later 6-month period ending at the end of November.

listed unit has the same meaning as in section 123A.

reference price has the meaning given by subsection (5).

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Attachment  B - Ozone Protection and Synthetic Greenhouse Gas (Import
Levy) Act 1995

Schedule 1-Amendments

Ozone Protection and Synthetic  Greenhouse Gas (Import Levy) Act 1995

1  Section 2A (definition of benchmark  average auction  charge)
Repeal the definition.

2 Section 2A
Inse1t:

per-tonne carbon price equivalent has the same meaning as in the Clean Energy Act
2011.

3  Subsection 3A(7) (paragraph (b) of the definition of applicable charge)
Omit "benchmark  average auction charge for the previous financial year", substitute
"per-tom1e carbon price equivalent most recently published under section 196A of the Clean
Energy Act 2011 before the start of the quatter".

4 Subsection 4A(5) (paragraph (b) of the definition of applicable charge)
Omit "benchmark  average auction charge for the previous financial year", substitute
"per-tonne carbon price equivalent most recently published under section 196A of the Clean
Energy Act 2011 before the start of the quarter".

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Attachment C- Ozone Protection and Synthetic  Greenhouse Gas
(Manufacture Levy) Act 1995

Schedule 1-Amendments

Ozone Protection and Synthetic Greenhouse  Gas (Manufacture Levy) Act
1995

1 Section  2A (definition of benchmark average auction charge)
Repeal the definition.

2 Section  2A
Insett:

per-tonne carbon price equivalent has the same meaning as in the Clean Energy Act
2011.

3 Subsection 3A(5) (paragraph (b) of te definition of applicable charge)
Omit "benchmark average auction charge for the previous fmancial year", substitute
"per-tonne carbon price equivalent most recently published under section 196A of the Clean
Energy Act 2011 before the statt of the quarter".

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